Volkswagen logs 26% drop in Q1 operating profit to EUR 2.34 billion

Volkswagen Group recorded a 26-percent slide in operating profit (earnings before interest and taxes) in the first quarter of 2013 to EUR2.34 billion ($3.05 billion) from EUR3.17 billion in the same period in 2012. The decline in operating profit was mainly attributed to lower demand in Europe as well as to investments on new vehicles.

VW likewise posted a 1.6-percent drop in revenues and 38-percent slide in net income to EUR1.95 billion. The German carmaker reaffirmed its March 14, 2013 targets to match the record operating profit of EUR11.5 billion posted in 2012 and to boost sales and deliveries to new record levels. VW said it is now bracing for increasingly tougher rivalry amid a difficult market environment in Europe.

The German carmaker said that it is not “completely immune” to the intense competition and the impact it has on business. The VW Group includes 12 brands from luxury brands Audi, Porsche and Bentley to volume carmakers VW, Skoda and Seat.

VW chief executive Martin Winterkorn remarked in a statement that as they, expected, business in the first quarter was dominated by the “difficult economic environment.” He remarked that the markets, particularly Europe and Germany, were sluggish. He expressed confidence that VW can “pick up speed over the rest of the year."

Daniel Schwarz, an analyst at Commerzbank, remarked "VW booked significant costs -- like the ones incurred for new-generation Skoda Octavia and the modular toolkit system -- in the first quarter of 2013 that should lead to sequentially rising cost advantages. Volkswagen saw its global deliveries surge by 0.2 percent in March month 864,400 vehicles as demand in North America and China offset slumping sales in Europe.